Dai is a stable currency anchored in USD 1:1 created and issued by makerDAO based on the Ethernet chain. Unlike BTC, ETH, EOS, and other tokens in general, Dai is not created by mining. Instead, a certain amount of ETH must be pledged by the demander of Dai, and then a certain amount of Dai is issued to the pledgee of ETH through a series of smart contracts. This is somewhat similar to USDT, but USDT is alleged to have a real pledge of DOLLARS behind it (although it is also purchased according to the audit results), while Dai is issued by the pledge of real ETH and the pledged ETH is issued according to the actual market value at that time. Dai is also issued by asset collateral. DAI is through collateral digital asset issuance, decentralized issuance.

If the value of a currency fluctuates wildly all the time, it cannot be used as a currency for daily payments and transactions. No one can afford to pay wages one day, and lose a third of their value the next day. Stablesoins can provide value preservation without exiting the cryptocurrency market when prices are highly volatile. Usually, stablesoins are issued through asset guarantee, such as USDT and TUSD, which guarantee the same amount of stablesoins through US dollar assets. For example, if the bank deposits us $100 million, USDT is issued, which implements stability through anchoring fiat currency. USDT is not publicly audited and is often questioned as overissuance. For example, if $100 million is guaranteed to issue $150 million USDT, $50 million USDT will not be convertible into DOLLARS. This is why stablesoins issued under supervision, such as TUSD and GUSD, tend to gradually replace USDT. DAI is also issued through asset collateral, DAI is issued through collateral digital assets, decentralized issuance, which can effectively make up for the lack of transparency in issuance of USDT.

Since the birth of Bitcoin, the cryptocurrency market has developed rapidly and is huge. First, the number of digital currencies keeps growing. Since January 2009, when the first cryptocurrency bitcoin was launched, by the end of 2018, there were more than 2,000 cryptocurrencies in the world. Second, the total market value of digital currencies has grown substantially. Before May 2017, the market value of digital currencies was small, but since then it has grown rapidly, peaking at nearly $800 billion in January 2018. Since then, the total value of digital currencies has declined, but it still tops $100 billion. At present, the need for staboin is booming with the explosion of the whole crypto market!

Dai can be considered a masterpiece of game theory, which carefully balances economic incentives to achieve one goal: the price of Dai is consistently close to $1. It designed a mechanism that would take steps to reduce the price of Dai when it exceeded $1; When Dai's price falls below $1, the mechanic raises its price. Rational users of this mechanism do so because they make money every time Dai's price falls below $1, and the further they deviate from $1, the stronger the financial incentive they have to fix Dai's price to $1. For example, if you need a loan, and you own ETH, and you believe ETH will appreciate in value, you can use ETH as collateral to generate Dai, use Dai to buy more ETH on a trading platform, and use ETH to generate more CDP(collateralized debt position, That is Dai's mortgage), leveraged transactions can be done entirely on the blockchain, without any third party or centralized institution. The increased demand for Dai will increase its price to more than $1, and when that happens, you can generate Dai, immediately sell it for more than $1, and you can make money. When Dai costs less than $1, CDP owners can pay off their debt at a lower price. For example, Zhang SAN opened a CDP with ETH worth $1,000 and then withdrew 500 Dai. Upon closing this CDP, 500 Dai needs to be repaid. If the price of Dai drops to $0.99, then you can buy 500 Dai loans for $495 and earn $5 worth of ETH. This balance of supply and demand ensures that Dai can always anchor $1. The success of Dai is reflected in the fact that each Dai keeps its price at $1. Because it can keep its $1 anchor, people's trust in it increases, creating a positive cycle. Dai is an entirely blockchain-based currency. Anyone wanting to buy Dai would have to place ETH in a canny contract called a collateralised debt obligation position (CDP), which issues Dai tokens based on the dollar value of the collateral. The dollar peg is maintained through the incentives of the MakerDAO system." In a nutshell, DAI is a contract-like design: it does not enforce a 1:1 lock in USD, but instead encourages arbitrage players to keep the price of DAI stable at 1USD. The reason why DAI adopted such a design is closely related to decentralization. In a decentralized system, there is no centralized facility such as a bank, and no institution can accept stablesoin. So designing an ETH based contract with incentives to ensure its value is anchored in dollars is, in principle, very close to a sustainable contract for ETHUSD. Of course, the latter needs to be done in a centralized exchange, whereas DAI can accept directly on the ETH chain, which is open and transparent.

1) Spinach market: The application of new technologies and products in spinach market is often ahead of other industries. The spinach market now favors cryptocurrencies, too, driven by the need to avoid regulation. But cryptocurrency prices are too volatile to be ideal for long-term bets: gamblers are exposed not only to the risks in spinach, but also to changes in the price of the cryptocurrency itself. With a stable cryptocurrency like Dai, they feel much better. (2) Financial market: In the financial industry, options and other financial derivatives generally require collateral with stable prices. Dai fits their needs well. For example, Dai's parent platform, Maker, offers decentralized trading leverage. (3) International trade: the cost of international trade may be high due to different policies and exchange rate fluctuations among countries. Using Dai for settlement can greatly reduce the impact of foreign exchange fluctuations. In addition, the transaction process can eliminate middlemen and other links, which is more efficient and cost saving. (4) Transparent accounting system: Nowadays, many centralized organizations/institutions are criticized for their honesty of accounting system. If Dai is used as the accounting system, then all transactions are fully verifiable. In this way, governments, businesses and organizations can be more efficient and less prone to corruption.

At the heart of Maker Smart Contracts is CDP. Let's use an analogy. Let's say you ask the bank to use home equity for a mortgage. You put up your house as collateral and they give you a cash loan. If the value of your house drops, they will demand repayment. If you can't make the payments, they'll put your house up for auction. To get the matter back to Maker, simply replace your house with ether, replace the bank with smart contracts, and replace the loan with Dai. When you give Ether (collateral) to Maker's CDP Smart contract (bank), the system issues Dai (loan) to you. If your ether value falls below a certain value, you must repay the Dai smart contract just like a bank loan, otherwise it will auction your ether. In short, CDP is just a place to put the ether in the Maker system.

Dai doesn't have a centralised institution like Tether to back its value, nor does it use real dollars to back banks worth $1 each. It exists entirely on the Ethereum network with smart contracts. Maker uses a collateral and price aggregation system to ensure that 1Dai is 1USD. This collateral is managed by MKR token holders. MKR holders act as buyers of last resort. To ensure that 1Dai = 1 USD. The magic of blockchain, smart contracts. Global clearing provides a final layer of security for stablecoin Dai.

Dai (Stablecoin of Maker) is backed by collateral (Ether). Let's say you're a holder of ether and you want to own Dai. Your first step is to send your Ether into a "secured debt position" smart contract called CDP for short. CDP is a smart contract that runs on the Ethereum blockchain and exists in the Maker ecosystem.

MakerDAO is a smart contract system on Ethereum that offers Dai (Ether Dollar), the first decentralized stablecoin, and derivative financial products. Dai is issued by full collateral on the chain of assets and is anchored 1:1 to the DOLLAR, with 1 Dai = 1 DOLLAR. Individuals and businesses can obtain safe-haven assets and liquidity by exchanging or mortgaging Dai. Maker has been applied in mortgage lending, margin trading, international transfer and supply chain finance. Maker 1 Dai = $1 Maker stabilizes Dai at $1 through an overmortgage and interest rate mechanism. The collateral is managed jointly by the MKR holder and a series of smart contracts. MKR holders act as buyer of Last Resort Global Settlement provides ultimate security Maker offers decentralized margin trading features Dai Features a constant price of $1.

Dai can be freely traded like other ERC-20 tokens, and any individual with an Ethereum wallet can own, receive, and exchange it without any middleman. No one or company can control it, making it capable of functions that were previously impossible. Dai can transfer money instantly, can transact across borders, and has no fees (except for ethereum fees). Dai allows merchants to enjoy the huge benefits of blockchain technology without having to worry about the huge volatility of crypto assets. Similarly, consumers don't need to worry about spending a crypto asset that continues to appreciate in value.

However, Dai's competitive advantage is unique because it is underpinned by a complex system of smart contracts involving collateral selection, risk management and stabocoin issuance. Most of the other staboins in the market are in the custody mode of a single legal tender. Only when users deposit DOLLARS, new staboins can be issued. The collateral for Dai can include a variety of on-chain assets and securities, plus Dai is not an entry requirement. Anyone can pledge a digital asset in the Maker system to generate Dai. Any other ERC20 stablesoins can be used as collateral for Dai, increasing Dai's market value.

From a trader's point of view, the most liquid stablecoins are the ones with the least risk. Because when a black swan happens, you can have enough liquidity to cover the retreat. Of course, it is also important to know under what circumstances your stablesoin will become "invalid". For example, USDT may become unstable in the event of a lawsuit or a run on it. DAI, on the other hand, "fails" when ETH prices fluctuate wildly. Traders can adjust their stablecoin holdings based on their own judgments of the market. DAI may not be as stable as we expect for some time to come, but a decentralized system will always be able to stand up when a decentralized system fails. DAI remains the best choice for those who believe in "decentralised finance". In the future, DAI will grow and grow as more people become involved in the DeFi ecosystem.

The application prospect of Dai is very broad. Of course, Dai's system comes with some risks. First, because smart contracts are new technology, the failure of the underlying blockchain could stop transactions or force them to be rolled back, among other things. Second, a financial "black swan" event could spark panic and accelerate redemptions of outstanding Dai. And, in the early stages of Dai, there was liquidity risk. With the development of technology and the Dai system itself, it is hoped and believed that these risks will be better managed.

We believe the main risk comes from CDP's contractual structure, which requires relatively stable collateral. When the price of the ETH and ERC20 series of tokens used as collateral changes dramatically, the stability of DAI is significantly affected.

The Maker Dai Stablecoin has been described as a consumer stablecoin because it stands out from the crowd by learning from its predecessors and competitors. It became the application that brought blockchain technology to the mass market. The success of Dai is reflected in the fact that each Dai keeps its price at $1. Because it can keep its $1 anchor, people's trust in it increases, creating a positive cycle.